Do You Use A Budget?

I feel that creating a budget is a fantastic first step towards creating a better financial future for yourself and your family. But it is just that - a first step in a lifetime journey. It's what comes after that first step that determines how successful you are in the long run!

In no particular order, here are four points to keep in mind afteryou have taken that first step by making a budget.

1) You need to stick to your budget. This is the most obvious thing (and also the hardest one). Now that the budget is in place, you have to ensure that you stick to it. If you budgeted $100 a week for food, you have to spend $100 (or less) a week on food. If you see a nice jacket in a store but you've already spent your clothes money for the week, you'll have to comeback another time. But if you do overspend on your budget, or give in to the urge to buy something that wasn't in the budget, don't beat yourself up. Figure out why you broke the budget (were you carrying extra cash at the time? did you have your credit cards with you?), work out what you can do to stop it from happening again, and get back to the budget.

2) Don't be afraid to tweak the budget - especially in the beginning. A budget isn't set in stone, especially in the beginning. Despite all your best efforts, it's almost certain that there were one or more uncommon expenses that slipped your mind when you created the budget. Or you may have thought (or hoped) that you spent a certain amount of money on a particular category - like food - but in fact you really spend more. If you missed an expense, the solution is simple - add it in to your budget, and take it into account every pay period. If you underestimated an expense, make doubly sure that it really is an underestimate. But if it is, simply change the figures in the budget to the new value and work with the new value from now on.

3) Remember to account for new and changing expenses. It's an unfortunate fact of life that the cost of living continues to go up. On the plus side, wages usually tend to go up as well (we'll leave the debate about if they go up at the same rate for another day). You need to update your budget to take into account both changes. For expenses that are variable (like the electricity bill), every few months you should go through the same process you did when you first came up with the average value - look at the past few bills,and work out what the average cost is. For expenses that are usually fixed (like a mortgage repayment), simply enter the new value in your budget when you find out about the change. (Of course, for something like a loan repayment you might want to consider paying the old amount if the repay amount drops, just so you can pay the loan off faster).

4) Start again if things change. Sometimes your life situation totally changes. You might move halfway across the country for a new job. You might start (or stop) living with your partner. Maybe your kids move out of home, or you find out you have a new kid on the way. Whenever a major event like this happens, it is a good idea to go right back to the beginning with your budget and recreate it all. Not only is this a good way to be on top of your new situation from the very start, but it also gives you a good chance to look at all your expenses to re-consider if you really need to spend all the money you currently do. As you can see, none of these points are hard (ok, sticking to the budget can be, especially at the start). But by keeping these points in mind, you will be able to take control of your finances -and reap all the rewards that that brings! And if you aren't sure about how to go about setting up a budget (there are hundreds of ways). You can get a ton of free budgeting and lifestyle tips in my e-newsletter at www.richardhackworth.com

Best Regards,
Richard Hackworth
www.actionradio.net
http://successblog.richardhackworth.com